The federal government has agreed to the unredacted release of Kevin Rudd’s statement to the royal commission into the home insulation scheme, in a stunning turnaround in Brisbane.

Late on Wednesday afternoon the former prime minister appeared before the commission to give evidence. But before he said a word beyond giving his name a legal stoush erupted over the large number of redactions made to his statement by government lawyers.

The commissioner, Ian Hanger QC, and legal representatives held a heated discussion about the huge portions of the statement which had been censored on request from the commonwealth owing to cabinet confidentiality.

On Thursday morning Tom Howes, for the commonwealth, informed the hearing of the government’s change of heart. "The commonwealth now supports ventilation of the redacted portions of Mr Rudd's statement,” he said.

Hanger said he had written down reasons for the decision he himself had come to, but suggested they were no longer necessary.

The request by Rudd's legal representatives that the cabinet documents be released to the public, and the government’s subsequent agreement to do so, sets a new precedent, well beyond that intended by Abbott and Brandis. On Wednesday evening the government's lawyers opposed the request; the lawyers of the victims' families supported it.

Rudd's legal representative, Bret Walker SC, told the commission the former prime minister had "no problem" with his whole statement being disclosed, but the decision was the commission's. He described it as "intolerable" that Rudd could be asked to give evidence with the story being so heavily truncated.

"My client is here ready immediately to verify his 31-page statement and all of it," Walker said.

Howes requested that the unredacted documents be submitted in a closed session, not to the public. Hanger asked whether that was legally possible, and if he could then use the evidence submitted in his final report.

Walker suggested Hanger's final report would be "impossible" should Rudd not be allowed to fully answer "suggestions" made by the current government that the home insulation scheme had been created in days.

"We want to answer that suggestion and we should be able to do so truthfully and fully," Walker said.

"The present government can't have it both ways. It can't require you to report faithfully on that matter and prevent you from pursuing the evidence about it.

"No other government has ever decided to ask a royal commission … for cabinet processes to be inquired into like this."

Hanger questioned the reasons for the requested secrecy. "It's not like it will affect our relationships with other countries," he said of the information contained.

The prime minister, Tony Abbott, said he was not concerned the decision to allow access to the confidential documents set a precedent that could come back to haunt him.

"I'm confident that we won't run a roof-bats style disaster and, frankly, if we ever do, it ought to be investigated."

"Let's face it, this is the most disastrous domestic program that the commonwealth government has ever been responsible for," Abbott told Sky News.

"We've got to learn the lessons, and frankly, if Mr Rudd can speak freely ... that surely helps the royal commission do its work."

Before Howes’s declaration to the commission, Martin Sweeney, the father of one of the men killed installing insulation after the scheme’s rollout, gave a brief statement thanking the commission and speaking of his family’s grief.

“No family should ever have to go through what we've gone through,” he said. "We love you very much, Mitchell, we will never stop missing you."